United Biscuits' units may split in private equity firm exit: analyst

The snacks and biscuits division of UK manufacturer United Biscuits could be parcelled out to different buyers, according to a research firm's analysis of the market following media reports the company is to be sold by its private equity owners.

The Blackstone Group and PAI Partners bought the manufacturer for £1.6bn in 2006 and are said to be sounding out investment firms for advice regarding an auction in the autumn of the Jaffa Cakes maker.

United Biscuits (UB) saw good performance last year with revenues of £1.26bn but had a tougher time of it in 2010 with aggressive targets set by its owners.

With industry analysts currently placing bets against whether UB will fall into the hands of another private equity firm or a branded food manufacturer, Chris Brockman, market intelligence manager at Leatherhead Food Research, said that global biscuit leader Kraft Foods would be an obvious frontrunner in terms of potential food firm buyers.

“However, I wouldn’t think Kraft would be rushing in to swallow another UK business so soon after Cadbury. Kraft of course also part owned UB before it went fully to PAI and Blackstone so would be going over past ground – not likely in my opinion.”

The market researcher told BakeryandSnacks.com that the iconic British brands that UB owns fit in with Premier Foods, although, he said, this again is an unlikely new owner “given its debt level”.

Splitting up business

Another option, according to market insiders, would be to break up UB and to sell off its biscuit and snack divisions separately.

“It would be feasible to split the biscuits business which is quite international (McVities plus the European biscuit brands such as Delacre, BN, Verkade) from the more UK orientated snack business (McCoys, KP, Hula Hoops),” argues Brockman.

The analyst notes though that the leader in the snacks business in the UK is PepsiCo and given its high share of the market “there would probably be competition issues in combining it with UB’s snacks business.”

Brockman maintains that a European player with less exposure in the UK could be an option for the snacks segment.

Some of the mayor savoury snack companies in continental Europe include Intersnack and Lorenz Snack-World. Behind Kraft, UB and Nestle, the next big players in biscuits are the likes of Bahlsen, Campbell’s and Kellogg’s.

“The biscuits business could fit well with a global biscuit player looking to grow its share on the world stage,” continued the market researcher.

Burton’s Biscuits, second in the UK market for biscuits, has also been linked with UB in the past and could be interested, said Brockman.

Buoyant market

Both biscuits and savoury snacks are buoyant markets globally and Leatherhead predicts that both will be rising in value by more than 5 per cent globally up to 2012, with strong growth potential in emerging markets.

In terms of union response to the news that United Biscuits may be put up for sale, Alan Black, GMB national officer said: "We hope that United Biscuits is bought by a company that has an established, successful food manufacturing background and record.

In the event of a sale, GMB will be look to establish a positive working relationship with the new owners in the interest of improving and defending our members' job security, pay and conditions of employment."

United Biscuits was founded in 1948 following the merger of two Scottish businesses, McVitie & Price and MacFarlane Lang and moved into nuts and crisps 20 years after.

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The snacks and biscuits division of UK manufacturer United Biscuits could be parcelled out to different buyers, according to a research firm's analysis of the market following media reports the company is to be sold by its private equity owners.